TY  - JOUR
AU  - Dubé,Jean-Pierre
AU  - Hitsch,Güenter J.
AU  - Rossi,Peter E.
TI  - State Dependence and Alternative Explanations for Consumer Inertia
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14912
PY  - 2009
Y2  - April 2009
UR  - http://www.nber.org/papers/w14912
L1  - http://www.nber.org/papers/w14912.pdf
N1  - Author contact info:
Jean-Pierre H. Dube
University of Chicago
Booth School of Business
5807 South Woodlawn Avenue
Chicago, IL 60637
Tel: 773/834-5377
Fax: 773/702-0458
E-Mail: jdube@chicagobooth.edu

Guenter Hitsch
University of Chicago
Booth School of Business
5807 South Woodlawn Avenue
Chicago, IL 60637
Tel: 773-834-7680
E-Mail: guenter.hitsch@ChicagoBooth.edu

Peter Rossi
University of Chicago
Booth School of Business
5807 South Woodlawn Avenue
Chicago, IL 60637
E-Mail: peter.rossi@ChicagoBooth.edu
AB  - For many consumer packaged goods products, researchers have documented a form of state dependence whereby consumers become "loyal" to products they have consumed in the past. That is, consumers behave as though there is a utility premium from continuing to purchase the same product as they have purchased in the past or, equivalently, there is a psychological cost to switching products. However, it has not been established that this form of state dependence can be identified in the presence of consumer heterogeneity of an unknown form. Most importantly, before this inertia can be given a structural interpretation and used in policy experiments such as counterfactual pricing exercises,alternative explanations which might give rise to similar consumer behavior must be ruled out. We develop a flexible model of heterogeneity which can be given a semi-parametric interpretation and rule out alternative explanations for positive state dependence such as autocorrelated choice errors, consumer search, or consumer learning.
ER  -